Are You Using It or Losing It? Act Now to Make the Most of Your Tax Efficient Investment Allowances.

Tax Efficient

Time marches on, and it marches fast. Don’t delay – get in touch with your financial planning consultant today.  Lloyd French of Delaunay Wealth Management offers some valuable deadline-driven advice on pensions, savings and investments. 


Let me start by adding my voice to the positive wishes coming everyone’s way for a much better 2021.

Last year simply could not have been predicted.  Let’s hope that, with vaccines on the way, not only can we go back to a near-normal life, but also that, like green shoots in the spring, that the economy and the stock market spring back into life – which I think they will.

Here’s to the new year bringing you and your family good health, happiness and financial security.

The Time Is Now

Yes, it’s that time of year again.  We’re fast approaching the self-assessment deadline (January 31st, of course), and the end of the fiscal year won’t be far behind – 5th April – and not forgetting the chancellor has pencilled in a budget for 3rd March.  As an investor, remaining tax-efficient is key, but I’d advise you to act now in order to reduce your tax burden.

Before I go on, I’m sure that I share the sentiments of many people, with the following:

Whilst paying your tax bill is not exactly the most diverting thing in our lives, it goes without saying that it’s a robust legal obligation, as well as our personal and civic duty.  Our over-stretched NHS and hard-working police force, for example, rely on us paying what we owe, and we owe them a debt of gratitude.

However, there are legitimate means for you to maximise your allowances, making them more tax efficient.  However, these allowances come with dates, and deadlines.  And, they’re set in stone. In other words, the tax man cometh and he taketh away. You can’t carry them over if you’re late.

So, What Are Tax Efficient Investments?

A number of capital investments can offer highly attractive tax incentives.

These are investment opportunities through which you can receive government-approved tax benefits.  The “efficient” part comes through paying less tax than you would normally, had your money been in other, “standard” investments.

The following gives some useful information on what these are, and how they work.

Take Care

Firstly, Delaunay Wealth Management offers financial planning advice on all aspects of investments, pensions and savings.

Do get in touch, not least if you’re considering high-risk investments such as Venture Capital Trust, Enterprise Investment Schemes or Seed Investment Schemes, which we touch on here.  In my view, these can be extremely risky and must only be entered into with professional input and advice.  You can reach us on 0345 505 3500, and we’d be pleased to help you.

Let’s start with:

Pensions Allowances

In a nutshell, the government likes you to save for your retirement.

So much so in fact, that it actively encourages this in the form of tax relief.  In other words, your tax bill will be lower if you regularly put money aside for your “golden years”.  Everyone has an annual allowance – the limit on the amount that you can contribute to a pension each year, whilst still receiving tax relief.  It’s based on your earning and is currently capped at £40,000.

There was a change in the April 2020 budget, however, which has proved good news for higher earners, previously somewhat disincentivised from investing in pension schemes.

The point at which the taper allowance kicks in has risen from £110,000 to £200,000; however, if you have a total income in excess of £300,000, the minimum annual allowance will go down to £4,000 (from £10,000) at the same time.

Also, anyone can make contributions of up to £3,600 per year into a pension and receive basic rate income tax relief at 20%.

Again, get in touch with us if you’d like to learn more.  The world of pensions can be quite a complicated one.


Individual Savings Accounts – ISAs

You can put up to £20,000 into a Cash Individual Savings Account without paying any tax on the funds invested.  They’re low-risk, and in my opinion, a safe option. And, they appear to be a popular option, regardless of where people are on the earnings spectrum.

Further, you can invest up to £9,000 in a Junior ISA – great news if you’re thinking ahead for your children.

My expertise as a financial planning consultant lies in Stocks and Shares ISAs.  They’re generally less secure than the Cash ISAS, but they have potential as a long-term option. Importantly, you won’t pay Capital Gains Tax on the profits you earn from share price increases.  They’re completely tax-free, in fact.


Capital Gains Tax Allowances

Simply defined, Capital Gains Tax is a tax on the profit you make when you sell an asset that’s increased in value.  So, here’s an easy example: if you bought an antique vase for £5,000 and sold it for say £10,000, you’d pay tax on the extra £5,000

You’ll pay CGT on most personal possessions worth more than £6,000 (apart from your car), property that’s not your main home (unless you’ve let it out or it’s used for business), non-ISA and PEP shares, and business assets.

If you’re a higher rate taxpayer, the amount you’ll pay is 28% on your gains from residential property, or 20% from other so-called chargeable assets.

However, you have a tax-free allowance here:

£12,300, and £6,150 for trusts.  You can’t carry over this amount to the following year, but (and this is key): there are means to mitigate this, such as spitting your sales of shares over two or more tax years and transferring income-producing assets to a lower-earning spouse.


High-Risk, High Reward Investments

These are, in brief:

Venture Capital Trusts

Investing in small start-up businesses whose shares are traded on the stock market

Enterprise Investment Schemes

Investing in small unquoted companies

Seed Investment Schemes

The same – but even smaller companies

A strong word of warning, if I may.  In fact, I can’t over-emphasise this: do not consider the above schemes without taking professional advice.  Why?  Because these investments are, in my opinion, extremely risky.  They may offer outstandingly good tax incentives, or – perhaps not.


In summary, the above could offer you tax-efficient investing that mitigates your exposure to risk and maximises your returns.

While we all support our local and national services through our tax bills – and we’re happy to do so – I can’t help but think that most of us would prefer to keep more, rather than less or our hard-earned money.  Not least in these uncertain times.

Get in touch with Delaunay as soon as possible if you’d like to make the most of your tax-efficient investments.  This is only a high-level guide, and there’s a lot to know and understand.  But my main message is:

Don’t lose it – use it.

You can reach me on 0345 505 3500.


Tax treatment depends on individual circumstances. Both your circumstances and tax rules may be subject to change in the future. Not all areas of Estate Planning or tax planning are regulated by the Financial Conduct Authority.